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Morning markets: Will US unveil another large order of US corn?

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You wait six weeks and then two come along at once, to distort the phrase about London buses. Will that prove true of Chinese order of US corn?

 

After the 1.16m-tonne order unveiled on Tuesday, the first large Chinese purchase of US corn announced since January 29, there is talk that another one may be in the wings.

 

Benson Quinn Commodities noted “word another 700,000-800,000 tonnes of corn sales are in the works”.

 

And it would not be unusual, after all, for China to smooth the path to talks between the countries in Alaska on Thursday by unveiling some business.

 

“It is not uncommon to see China make good faith purchases ahead of such meetings,” said Karl Setzer at AgriVisor.

 

‘I have no idea…’

Certainly, Chicago spot May corn futures edged higher again in early deals, although gains were limited to 0.1%, taking the contract to $5.54 ¾ a bushel, as of 10:20 UK time (04:20 Chicago time),

 

“Corn is up near resistance in its recent trading range which may limit upside potential” ahead of US trading hours, said Benson Quinn Commodities.

 

Mike Mawdsley at First Choice Commodities, while saying that for Wednesday the “question is, will there be more bookings?”, flagged that in the last session corn futures actually sold-off immediately after the China order was announced.

 

“The response by corn after the news was typical – sell the fact.” (This in terms of “buy the rumour sell the fact”).

 

“After hitting $5.55 ½ a bushel on the open, corn traded into negative territory within 15-20 minutes.

 

He added: “I think I can make it official. I have no idea what these markets will do on any given day - and neither does anyone else. Be smart, manage risk, enjoy life.”

 

‘More plants coming back online’

On Wednesday, the corn market may get a further demand boost in terms of data on US ethanol production last week, with a Bloomberg poll forecasting an increase in output of 8,000 barrels per day week on week.

 

“Ethanol demand is picking up, more plants coming back online next month. Driving miles are going up and even air traffic is improving,” said Benson Quinn Commodities.

 

It noted also that returning US ag secretary Tom Vilsack “will be more supportive of the sector than the prior administration”, which allowed many refiners to doge biofuel blending mandates.

 

“US feed demand is good with decent margins” too.

 

‘Crush margins are lower’

Still, on the negative side are revived worries over China’s renewed African swine fever (ASF) outbreak, which may limit feed needs.

 

“China crush margins and crush rate are lower due to ASF,” said Steve Freed at ADM Investor services.

 

“This could slow demand for US soybean exports,” and has “also dropped Brazil soybean export prices”.

 

(In fact, on Wednesday corn futures for May added 0.3% to 2,718 yuan a tonne on the Dalian exchange, and soymeal futures 1.4% to 3,266 yuan a tonne, easing a bit worries over Chinese feed demand.)

 

South American weather

There are also ideas that US sowings of corn and maybe soybeans could exceed the US Department of Agriculture’s initial expectations – a topic to come in greater focus as we draw near the end-of-March USDA report on US growers’ planting intentions.

 

There are ideas of improvements too in South American weather, particularly in terms of long-awaited rains for Argentine crops, with more dispute over ideas of drier conditions for Brazil, where rains are delaying the soy harvest and last plantings of follow-on safrinha corn.

 

“Drier Brazil weather should help soybean harvest there,” said Mr Freed.

 

Terry Reilly at Futures International said that “Mato Grosso will continue to see widespread rain delaying soybean harvesting and corn plantings”.

 

‘China arrivals high’

More definitely a depressant for soybean bulls is the pick-up in Brazilian exports of the oilseed, notably to China, after delays reflecting the slow harvest.

 

“China arrivals of Brazilian soybeans are high, at over 2.3m tonnes last week, through March 11, up about double from the same week in February,” Mr Reilly said.

 

Brazil, meanwhile, reportedly exported 5.1m tonnes of soybeans in the first half of March, with a further 11.5m tonnes on the books for the second half.

 

That total, if completed, would easily set a record, beating by far the total for 11.6m tonnes reached in March 2020.

 

China vs Chicago prices

Chicago soybean futures for May eased by 0.4% to $14.17 a bushel, despite a 0.3% rebound in soyoil for May to 55.27 cents a pound, in turn spurred by a 1.2% bounce to 3,944 ringgit a tonne in June Kuala Lumpur futures in rival vegetable oil palm oil.

 

Malaysia kept at 8% its palm export duty for April, but raised to 4,331.48 ringgit per tonne, from 3,977.36 ringgit per tonne, the reference price, a figure higher than investor had expected, according to a Reuters report.

 

At least that may encourage exports short-term, and whether that had a hand in weakening Dalian prices…

 

Dalian soyoil for May shed 2.0% to 9,238 yuan a tonne, while May palm oil tumbled by 2.7% to 7,792 yuan a tonne.

 

Brent crude, easing 0.8% to $67.85 a barrel, was little help either to ags such as vegoils used in making biofuels.

 

‘Reducing needs for weather premium’

Back in Chicago, wheat futures for May shed 1.0% to $6.40 ¾ a bushel.

 

“Good US [southern Plains] rains and slow US export pace is offering strong overhead resistance especially to Kansas City hard red winter wheat,” which for May was also down 1.0%, at $6.03 a bushel.

 

Paris soft milling wheat futures have stopped giving support too, with the May lot down 0.7% at E220.50 a tonne, setting course for what would be a seventh successive negative session.

 

“Improved [crop] condition reports from Europe are reducing the markets’ needs for a weather premium,” Mercantile Consulting Venture said.

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